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Slaughter Numbers Suggest Producers Ready To Expand The Herd

Although beef cow slaughter through the front half of this year likely precludes herd expansion in the January 1 inventory, current market and forage conditions could prompt 2% growth in 2014, according to Derrell Peel, extension livestock marketing specialist at Oklahoma State University.

“Beef cow slaughter for the year to date decreased 13% in the most recent two weeks of data available,” Derrell Peel, Oklahoma State University Extension livestock marketing specialist, said last week. But Peel adds that even decreases in beef cow slaughter for the year as sharp as 8-12% would amount to a more modest annual decline of 4-5%.

“As long as drought conditions continue to moderate, beef cow herd growth of 2% is possible in 2014 with an additional 2-3% in 2015,” Peel says. More rapid growth is unlikely, he says, due in part to the driving forces of the current liquidation.

Historically, mostly internal factors—calf prices, beef cattle biology and forage quantity and quality—drive the cattle cycle. Since the current liquidation began in 2001, though, Peel points out external factors have been the primary force. These include input market shocks that reduced cow-calf profitability, a national and global recession that tempered cattle prices and severe drought in important cattle-producing states.

“The last 3.4 million head decline in the beef cow herd was not due to typical cattle cycle factors,” Peel says. “External factors have masked and overwhelmed cyclical tendencies and don’t necessarily mean the cattle cycle is gone or irrelevant, although some people have said so.”

One thing that is clear, according to Peel, is that the nation’s herd has gotten younger and more productive.

Since 2007, the calculated number of heifers entering the cow herd has remained above average, even while the high rate of cow culling has resulted in net liquidation and reduction in the cow herd inventory.

“In a more typical cattle cycle, the rate of heifer placement decreases at the same time as increased cow culling, with both contributing to herd liquidation,” Peel explains. “In recent years, producers have continued to invest in replacement heifers despite the necessity of reducing herd size because of external factors… the industry has simultaneously increased cow culling and heifer placements…”

Given the youth of the U.S. beef cow herd, a more significant decrease in cow culling is possible–less than 8%– but Peel says such a large decrease in cow slaughter might result in a disruption of lean beef supplies. That would add to pressure on the packing sector.

“The sharply higher cull cow prices that would result should mitigate some of the decrease in cow slaughter,” Peel says. “At the same time, significantly more replacement heifers may be reported Jan. 1, 2014, but the report likely will include a higher-than-normal percentage of heifer calves that will not produce a calf until 2015.”